State of Logistics: May 1,2020

Patrick O'Loughlin May 1

Coronavirus Numbers

  • Worldwide cases reach 3.25 million people
  • Worldwide death toll at 233,000 people
  • United States cases over 1 million people
  • United States death toll over 63,000 people
  • Italy and Spain combined death toll is over 52,000 people

Over the last two weeks, the amount of global cases has increased from 2.1 million to a total of 3.25 million. About 1 million of those cases are in the United States, up from 670,000 two weeks ago.

The feeling in the United States seems to be that we are turning a corner on the Coronavirus as states push to reopen. The nation seems split on whether we are reopening too quickly or if we are reopening too slowly. President Trump has laid out a plan to reopen but has given some control to the state governments to decide if their states are ready to reopen.

Economic Highlights

  • Americans cut spending 7.5% in March 2020, largest monthly decline since 1959
  • Countries that use the Euro as currency have seen their GDP fall 3.8% in the first quarter of 2020
  • U.S. Crude Oil Futures went negative for the first time on Monday, April 27 (has since returned to positive numbers)
  • Average daily freight rates for VLCCs (Very Large Crude Carriers) are around $150,000 while the average rates were around $10,000 this time last year
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The price of future oil contracts has caused a stir around the world as prices went negative on Monday, April 27. OPEC, an oil cartel, has agreed to cut production after increasing production not that long ago. In simple terms, the world is oversupplied with oil which is believed to be caused by an immense drop in demand due to the Coronavirus.

Because of this demand drop, oil storage has filled quickly around the world. Average daily freight rates for VLCCs (very large crude carriers) are at about $150,000. Last year at this time, average daily rates were about $10,000.

To give some perspective, a VLCC can hold about 2 million barrels of oil at one time which is quite a bit of oil. However, 1 VLCC at full capacity could only deliver 10% of the total oil the United States uses in 1 day.

Very Big Ships

Large ships that are capable of carrying over 20,000 TEUs (Twenty Foot Equivalent containers) are expected to wait longer at ports to fill up before embarking on their routes. This will cause ships to have fewer port calls and in return delay deliveries across many supply chains.

In what may be remembered for its unfortunate timing, South Korea christened the world’s largest container ship, the Algeciras, which has a capacity of 24,000 TEUs and is as long as four football fields! It is the first of twelve “megamaxes” (very big ships) that HMM (South Korea’s flagship carrier) plans to have delivered and operate in the next year. The demand slowdown and slowdown caused by the Coronavirus could not have come at a worse time for HMM as many carriers are reducing capacity due to low demand and existing excess capacity.

Due to low demand and excess capacity around the world, expect the world’s largest container lines to post losses throughout 2020. This can be attributed to over 400 sailings cancelled on main trade routes since February due to plummeting demand in Western countries.


While many people expected China to be on the hot seat as the producer of the world’s goods and supply chain staple, in a survey conducted by PricewaterhouseCoopers LLP, over 70% of survey respondents had no plans to relocate their production operations outside of China because of the events that have unfolded due to the Coronavirus.

Instead, it is expected that many companies who have a lot of their production done in China will include another country in their production plans to mitigate the risk of future events in China influencing their supply chain as heavily as it has been affected this year.

Bad News for Cruise Lines

A Wall Street Journal investigation has determined that the largest cruise lines in the world knew their ships were effectively incubators for the Coronavirus and continued sailings around the world putting passengers and crew at increased risk. More than 100 cruise ships sailed since the first confirmed death of a cruise passenger on March 4 who was on a ship that had stopped in the United States.

The United States Center for Disease Control and Prevention has determined that over a dozen of those sailings on international voyages, including stops at least 1 port in the United States, had passengers who had tested positive for the virus within 14 days of disembarking. The CDC also reported that by March 13, 17% of the cases in the United States were linked with cruise passengers.

This information could lead to Cruise Operators such as Carnival Cruise Lines, Royal Caribbean, and Norwegian Cruise Lines to see their day in criminal court due to their alleged failures of putting the health and safety of passengers before financial gain.